Karnataka HC to quash ED proceedings against Sammaan Capital after clearing its own doubts

The Karnataka High Court on Tuesday quashed proceedings initiated by the Directorate of Enforcement (ED) against Sammaan Capital (formerly Indiabulls Housing Finance Limited or IHFL) in a money laundering case after rehearing the matter [Sammaan Capital v Directorate of Enforcement].

The Court said that it would quash the proceedings earlier last week. However, on August 17, the Court said that it would rehear the case since it was not informed of the proceedings pending before the Supreme Court against IHFL.

Justice M Nagaprasanna noted an affidavit submitted by the ED in today's order that the proceedings pending before the Supreme Court were not connected to the Enforcement Case Information Report (ECIR) in the current proceedings before the Karnataka High Court.

"The learned senior counsel for the petitioners Prabhuling Navadgi and Dhyan Chinnappa in unison would submit that there is the matter that is pending before the Apex Court or directions issued by the Apex Court in those matters has nothing to do with the present matters. They would take this Court through the affidavit filed by the ED in the case at hand with particular reference to para 8-12," the judge noted.

The Court further noted that the uncertainty was not created by the counsel appearing for the parties, but by the Court itself.

"The obfuscation is not on account of either the learned senior counsels for petitioner or for the counsel representing the ED. The obfuscation is generated by this Court and is now dissolved by this Court."

Additional Solicitor General (ASG) Aravind Kamath, appearing for the ED, submitted that the proceedings pending before the Supreme Court were related to the Indiabulls and Yes Bank fraud.

The Court recorded the ASG's submissions that the ED was proceeding against Sammaan Capital based on offences registered in Karnataka.

"The learned ASG would submit that the crimes that were pending before the Apex Court and the directions issued by the Apex Court qua the present petitioner has nothing to do with the present crimes. The present crimes stood on the foundation of the predicate offences and would admit that the predicate offences have been closed today."

Last week, the High Court said that it would quash proceedings against Sammaan as 4 out of the 5 registered predicate offences in the present case had culminated sans any conviction. In the 5th offence, the police had filed the closure report (B-report) in 2022. It noted that the lower court has not yet accepted the same due to non-appearance of the complainant even after having listed it 10 times.

"The present crimes stood on the foundation of the predicate offences and would admit that the predicate offences have been closed today. In so far as the B report is concerned, ASG also submits that no action has been taken on the strength of the pendency of the proceeding before the concerned court on the B report. As many times as 10 times, the matter has been listed for acceptance of the B report but the complainant has not even appeared before it. It is on these cores that this Court followed the judgment of Apex Court, Vijay Madanlal Choudary (v Union of India) and obliterated the proceedings against the petitioner," the Court noted in today's order.

Justice M Nagaprasanna said that he saw the Supreme Court proceedings involving IHFL before signing the order quashing the ED proceedings against Sammaan. In order to clear his conscience, he wanted to rehear the matter.

"That's all I wanted, I just wanted (to clear) my conscience. I will quote the affidavit in the order."

Senior Advocate Prabhuling Navadgi, appearing for Sammaan Capital, said that the proceedings concerned IHFL's Founder-Director Sameer Gehlaut and did not pertain to Sammaan Capital.

Samman Capital was also represented by Senior Advocate Dhyan Chinappa along with Advocates Chintan Chinnappa, Laksh Khanna and Venkatesh Kamath.